WASHINGTON (Reuters) - Medicare was a driving issue in a special congressional election in New York on Tuesday where elderly voters punished a Republican candidate for backing a proposed revamp of the popular healthcare program.

Most analysts say limiting spending growth for Medicare and U.S. healthcare in general is needed to cut future deficits and debt. Deficit reduction talks led by Vice President Joe Biden have focused in part on Medicare.

Here are some of the options for reducing Medicare spending that could be considered.

PRIVATIZE THE PROGRAM

Republicans in the House of Representatives are pushing to phase out traditional fee-for-service Medicare and create a voucher-like system for future retirees to buy subsidized medical coverage from private insurers.

The proposal would shift the risk of rising healthcare costs from the government to the elderly. Higher deductible and co-pays in private plans would encourage people to seek cost-effective care. But higher costs would encourage some people to go without needed care.

Polls show this proposal is unpopular among many voters, particularly with the elderly and independents. It helped Republicans lose a seat in Tuesday's special election in upstate New York. Democrats strongly oppose the idea and will likely use it against Republicans in next year's congressional and presidential elections.

EXPAND PAYMENT BOARD AUTHORITY

President Barack Obama's healthcare overhaul last year created a new Independent Payment Advisory Board to help rein in Medicare spending if costs exceed a growth rate target. Recommendations made by the independent board would go into effect unless Congress acts.

The panel is restricted in what it could consider. For example, it cannot propose a premium increases, benefit reductions or rationing of care. Expanding its authority would give it more power to curb costs, but the idea is unpopular.

Republicans attacked the creation of this panel and some Democrats do not like it either. Hospitals and other healthcare providers are wary of it as well. Congress is unlikely to go along with expanding its authority.

REDUCE SPENDING FOR PRESCRIPTION DRUGS

Allowing Medicare to use its huge purchasing power to negotiate lower drug prices for its prescription program is popular among Democrats but opposed by Republicans who say it would be the same as imposing government price controls.

The Medicare drug program is mostly provided through private plans and another option would be to create a government-run plan for beneficiaries. Many Democrats support that idea, but Republicans strongly oppose it, arguing it would impose price controls and shift costs to the private sector.

UPDATE MEDICARE'S FEE DESIGN AND COST SHARING

Updating Medicare's fee-for-service design and cost sharing requirements could encourage patients to seek more cost-effective care. Beneficiaries would have to pay more out-of-pocket expenses. But putting a cap on those expenses could help build public support for such a plan. The current fee-for-service plan has no cap on out-of-pocket expenses.

Many people buy so-called Medigap plans to cover costs not paid for by Medicare. Some budget hawks have proposed forcing those plans to impose a deductible before supplemental insurance coverage kicks in.

Proponents argue that requiring patients to share costs will save Medicare money by discouraging unnecessary tests and visits to the doctor. But Medigap plans are popular and the proposal will likely meet resistance in Congress.

RAISING PREMIUMS FOR HIGHER INCOME PEOPLE

Higher earners already pay more for medical insurance under Medicare as well as pay more for their prescription drug benefit. Asking high income people to pay even more for their coverage is an option that appears to be gaining support.

The drawback is that higher earners may decide they get a better deal from private insurers and leave Medicare. That could leave Medicare with a sicker, more expensive insurance pool, some analysts have said.

RAISE MEDICARE ELIGIBILITY AGE

The Republican budget also proposed raising the eligibility age for Medicare to 67 from 65. The proposal would reduce Medicare costs and increase payroll revenues from individuals who would stay in the workforce longer.

But critics say raising the Medicare eligibility age would force many to go without insurance and put more elderly people into private plans which would push premiums higher.